Cost Management

Supply Chain Woes Help Doom Target in Canada

Poor distribution by Target reportedly meant that shelves lacked basic products.
Katie Kuehner-HebertJanuary 16, 2015

Minneapolis-based Target Corp. said Thursday it was shuttering its 133 stores in Canada, laying off 17,000 workers and placing its Canadian operation under bankruptcy protection.

Target_store_Scottsdale_Centre_in_Delta,_BC“While this is a difficult decision, we believe it is the right one for Target,” Brian Cornell, Target chairman and chief executive officer said in a press release. “We had great expectations for Canada but our early missteps proved too difficult to overcome.”

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In a related Securities and Exchange Commission filing Thursday, Target said that it expects to report a pretax write-down of $5.4 billion related to the discounted operations in the fourth quarter of its fiscal 2014, ending Jan. 31, and other $275 million in its fiscal 2015.

A New York Times article Friday said that supply chain problems helped doom Target’s operations in Canada. “Differences in suppliers and other factors meant that Canadians found Target’s Canadian stores to be more expensive than they anticipated, and a poorly executed distribution network meant that shelves were often missing basic products,” according to the Times.

Target “also failed to understand the depths of Canadian loyalty to certain competitors (including the well-established Walmart and Costco) or the reluctance of its consumers to adopt a one-stop shopping habit,” the paper reported.

Another fatal flaw: Target took over stores in run-down Canadian neighborhoods from discount store Zellers. That was a move in opposite direction in terms of Target’s attempt to upscale its brand in the United States, according to a Fortune article Thursday.

“They diminished people’s image of what Target was,” Doug Stephens, president of Retail Prophet Consultants in Toronto, told Fortune. “They should have done fewer stores, but better stores.”

Photo by Kristiantiholov